DBS

39 ROUTES TO INVESTMENT STRUCTURES, PROCESSES AND SECONDARY MARKETS There are a variety of routes to investment in debt based securities and the chosen route might be influenced by factors such as the required level of diversification, the extent of due diligence provided, or the method of agreeing rates. This gives an adviser the opportunity to add value for their clients by not only sourcing the most pertinent investments, but also accessing them in the most fitting way. The primary investment methods are: CROWDFUNDING PLATFORMS Platforms can provide a source of information on SMEs by providing research and company information, or simply facilitating the direct connection of potential investors with these firms 77 . Alternative finance platforms are now quite numerous in the UK, with the success of P2P lending, for example, being built on the reputations of these trusted intermediaries, some of which have also entered the DBS market. Others, such as Downing, have experience of different areas of the mainstream finance market, and a number of equity-based crowdfunding platforms, such as Crowdcube, are also offering debt based investment instruments 78 . Of course, the regulatory status of investment based crowdfunding platforms, as FCA authorised entities, providing ongoing investor protections, is a huge factor for consideration. Usually, the platform deals with all transactions and custody, making administration quite straightforward. Since online sites have significant reach to many potential investors, the minimum levels of investments accessible through them may well be lower. This allows for increased, low cost diversification across a range of issues. Advisers and investors can also take advantage of the ongoing development of new and innovative products which the existing alternative finance platforms continue to undertake. The reputation of platforms can only be enhanced by the fact that Triodos Bank, with full banking permissions and licences, promotes debt based securities through the Corporate Finance section of its standard website. DISCRETIONARY PORTFOLIO SERVICE The expertise that can be brought by a discretionary portfolio service should not be underestimated. It can allow for diversification across various debt based securities, to a greater extent than individuals because of the pooling of clients’ money, whilst also minimising transaction costs. As authorised and regulated practitioners, discretionary fund managers should also have a view of the whole of the market and the ability to pick out the best deals, allowing advisers and investors to focus on ensuring that the Discretionary Fund Manager is investing according to the client’s risk profile and financial objectives. On the downside, there are obviously additional costs associated with such advice, upping the cost. Rockpool is an example of a manager which provides this facility, offering a lending portfolio service for loan notes which includes asset-rich loans, typically backed by tangible asset security and Growth loans which target higher returns through lending against the cashflows of successful private companies. The intention is to source 6-8 across the strategies per year. Investors may self-select or rely on Rockpool to build them a mixed lending portfolio. DBS AGGREGATOR SITES (FCA authorised) Sites include Abundance and UK Bond Network (FCA authorised) Sites include Downing LLP (FCA authorised) Sites include Crowdcube AGGREGATORS In response to the growing number of alternative investment platforms, there has been an emergence of aggregator sites. These facilitate the products of more than one platform, aggregate their information for research and comparisons, and provide transaction functionality. Their aim is to simplify the selection process, assisting investors and advisers with analysing the marketplace. These sites give access to multiple origination platforms as a portal, which allow greater diversification across multiple platforms using a single account log-in. They can also allow DBS investments originated from various platforms to be held in a single Innovative Finance ISA, something that individual platforms are unable to do. However, advisers should be careful to consider the fees that apply for an aggregator service, in addition to any platform fees. Aggregator sites that facilitate platforms offering DBS include: